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How Real-Time Visibility Helps Private Equity Firms Invest Better During Uncertain Markets

Insights 1 - 2 to 1 ratio2020 was a year for the books. While no industry was untouched, private equity firms found themselves uniquely impacted. With holdings spread across portfolio companies and industries, private equity firms’ had pandemic-induced challenges magnified many times over. Without the ability to view multi-entity investments & holdings from various angles - in consolidation or detail - it’s nearly impossible to have the insight needed to make strategic investment decisions. How can they get that insight? Real-time visibility from Financial Management software is helping private equity firms invest - and perform - better during uncertain markets. Let’s discuss how exactly.

Data-driven Analytics are More Important Than Ever for Private Equity Firms

The pandemic put private equity firm’s standard operating procedures into flux. Valuations shifted as portfolio business’s performance wavered. Some companies’ products & services that were mission-critical pre-pandemic were suddenly seen as discretionary. Even now, deal executions are complicated or delayed as shutdowns prevent site visits and face-to-face visits.

Data-driven analytics are nearly impossible to gather when private equity firms rely on disconnected applications and spreadsheets to run operations. Without a single source to review & analyze data, firms risk losing bits of information that could be vital to investment strategies and plans. To navigate the ‘now’ and the ‘next normal’, firms need real-time visibility into their core financial operations and into their firm’s portfolio companies. Research giant PwC agrees. In its 2021 outlook of the industry sector, PwC noted that to succeed now, private equity firms “will want to change their playbook, focusing instead on data-driven analytics to drive value creation.”3

A financial management application that supports deep insights and data-driven analytics will help private equity firms drive better investment decisions. For example, Sage Intacct offers role-based dashboards that allow authorized staff to view specific data, including stock and bond holdings, private equity funds, and overall assets under management (AUM) — complete with visual direction indicators. The dashboards can include graphs that display helpful information such as the investment mix and portfolio trends over time. Clicking on any value in the charts allows users to drill into underlying source transactions. Sage Intacct’s Interactive Visual Explorer (IVE) new multi-angle, multi-dimensional visualization tool provides end users a new level of continuous insight into real-time data.

Question: Are you getting consistent data from your firm and
portfolio companies so you can use it for both business analysis
and achieving economies of scale?1

Bring Portfolio Companies into the Fold

Financial management software helps private equity firms manage their capital structure, complex deal designs, and ever-changing regulatory standards. Portfolio companies need the same capabilities and insight to generate the returns everyone expects and easily report up to the firm.

If a portfolio company relies on QuickBooks and other disconnected applications to track their accounting data, it makes the private equity firm’s job much more difficult. Rather than easily comparing the same metrics across its portfolios, someone will need to normalize the data, ensuring the private equity firm has standardized values for reporting purposes.

It’s for this simple reason that many private equity firms encourage — or even require — their portfolio companies to adopt the same financial management solution they use. With a private equity software application like Sage Intacct in place at the portfolio company level and the equity firm level, sharing, comparing, and strategizing becomes much simpler and more powerful. However, while features and functionality can help jump-start a healthy ROI, an implementation partner that understands the private equity industry and how to put the software to work for both the firm’s & the portfolio company’s needs can have a big impact. A partner with industry experience can provide suggestions, guidance, and direction that amplify the power of the software and accelerate the ROI of the solution.

Financial Management Software Delivers Visibility in Real Time

Using a financial management application like Sage Intacct can help private equity get a clear picture of the business(es), allowing them to focus on a comprehensive operational strategy for each portfolio company.

In addition to dashboards, Sage Intacct offers real-time access to the financial reports that matter most, including reporting across multiple entities, assets, and currencies. Data held in separate portfolio management applications is easily included in financial reports thanks to the open APIs that are part of Sage Intacct. With all critical information in one secure application, equity firms can shorten closing cycles, demonstrate compliance with ever-changing regulatory standards, and drive more informed investment decisions and performance management.

As a bonus, Sage Intacct supports statistical accounts and the ability to collect nonfinancial data. Using this functionality, firm managers have access to the detailed data & metrics needed to monitor their clients’ and funds’ performance while addressing issues & opportunities by exception.

Private equity firms need to use data more effectively to drive human thinking that increases value before, during and after their transaction.3

Partnership Boosts ROI

Implementing a financial management solution like Sage Intacct is a smart venture for private equity firms. So is an implementation partner that can really help firms gain the most value from the solution. In case this isn’t clear already, BT Partners has a proven track record of helping private equity capitalize on their investments.

With in-depth industry knowledge combined with comprehensive discovery and implementation processes, we’ve helped many private equity firms generate the highest possible return on their software investments. We understand what metrics and insights private equity firms and their portfolio companies care about — and we know how to draw them from Sage Intacct. This experience can be a significant differentiator in not only the time to a return on the solution investment, but getting that insight that differentiates your equity firm as well.

 

Sources:

  1. Private equity growth in transition, Deloitte, 2016
    https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-fsi-private-equity-growth-in-transition.pdf
  1. How private equity operating groups are taking on the challenge of the coronavirus, McKinsey & Co, April 2, 2020
    https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/how-private-equity-operating-groups-are-taking-on-the-challenge-of-the-coronavirus#
  2. Private equity deals insights: 2021 outlook, PWC
    https://www.pwc.com/us/en/industries/private-equity/library/quarterly-deals-insights.html

Topics: Business Analytics, Performance Improvement, Cloud ERP, Sage Intacct, Financial Management, Private Equity, Investments & Holdings, Real-time Visibility